TAX TRANSPARENCY MEASURES
Since our last newsletter, new legislation has been passed to introduce greater company transparency in Australia.
This includes a report disclosing information about particular companies taxable income, taxes paid and turnover. Companies included in the report include those with greater than 50% foreign ownership with a turnover greater than $100 million.
It also includes additional financial reporting by “significant global entities”, including entities that are part of a multinational group with turnover of more than $1 billion. For financial years commencing on or after 1 July 2016, all taxpayers that are members of a “significant global entity” are required to lodge General Purpose Financial Statements with the ATO.
PENALTIES FOR FOREIGN INVESTORS
From 1 December 2015, a new property register requires that foreign investors register their rural or residential property interests. The ATO is responsible for enforcing Foreign Investment Rules.
Foreign investment in residential real estate can only be undertaken with Foreign Investment Board (FIRB) approval. Regardless of the value of the residential real estate, foreigners generally need to notify the FIRB when they intend to purchase residential properties. Where a foreign investment takes place without FIRB approval, the investor may face significant penalties. Further details, including the limited exemptions to the rules, can be found here.
From 1 March 2015, the threshold for reporting an interest in rural land was reduced from $252 million down to $15 million. Unless they are a resident in a country which has a free trade agreement with Australia, a foreign investor with total rural land investments exceeding that amount must obtain approval prior to purchase.
Penalties for failure to comply with the new rules carry penalties of up to $135,000 and/or three years jail for individuals, and up to $675,000 for companies.
CAPITAL GAINS TAX WITHHOLDING REGIME
From the 1 July 2016, when a purchaser acquires an Australian real property valued at $2 million or more from a foreign resident, the purchaser is required to withhold ten percent of the purchase price and pay it to the ATO.
Where the vendor believes that withholding 10% is inappropriate, they can make an application to vary this amount. In the majority of cases the variation application will be processed within 28 days.
The vendor is entitled to a credit for the amount withheld once their tax return is lodged.
Full details of the new regime, including links to the variation application form, can be found on the ATO website.
SIMPLIFYING TRANSFER PRICING RECORD-KEEPING
DOING BUSINESS IN AUSTRALIA
For general information on tax and other regulatory issues facing foreign business looking to trade in Australia, we have prepared a “Doing Business in Australia” document.
We hope that it is helpful, and would welcome any queries or feedback you may have. Click here if you’d like to read it.
We have written this newsletter specifically for overseas advisers, with the aim of keeping you abreast of specific developments and changes that are occurring in Australia. These changes might effect your business, and some of your clients, so we hope that you find the articles interesting and useful.
If you would like further information about anything within this newsletter, please feel free to get in touch with Darren or Michael – their contact details are below.
I am happy to help you if there is anything from this newsletter that you need clarification on. Feel free to contact me me via email by clicking here.
As Stanley & Williamson’s Master of Tax, please feel free to contact me to discuss anything raised in this newsletter. You can send me an email by clicking here.